Export clampdowns and a smartphone face-off

Hello, everyone!

This is Lauly, waving hello from Penang, Malaysia. It has been a very busy two weeks for me. Last week I wrapped up covering Semicon Taiwan — one of the world’s most important chip fairs — with my colleague Annie Cheng Ting-Fang.

One of the highlights was the presence of leading memory chipmakers SK Hynix and Samsung Electronics, who participated in this year’s event for the first time ever. The two South Korean companies said in their keynote speeches that they are seeking closer collaboration with Taiwan’s tech industry.

That came as something of a surprise. The chip industry has traditionally seen more competition than collaboration between South Korea and Taiwan, but the artificial intelligence boom is reshaping the landscape. As just one example, Nvidia’s wildly popular AI accelerator chip requires Taiwan Semiconductor Manufacturing Co’s advanced chip packaging technology to link the US chip developer’s GPUs with high-bandwidth memory chips from the likes of SK Hynix.

Talk of AI and next-generation tech, such as silicon photonics, was all around Semicon Taiwan. It was also a great opportunity to catch up with old industry friends and learn new things (and hear the latest industry gossip).

Two days later, I jumped on an early flight to Penang, where I switched focus from the upstream supply chain to the downstream, namely printed circuit boards.

Passive System Alliance, a leading Taiwanese component supplier, opened its largest PCB factory outside of China and Taiwan in Penang to capture the booming AI demand. PSA was one of the earliest PCB makers to expand investment outside of China amid the ongoing Washington-Beijing trade war, acquiring Japan-based Elna in early 2018.

“We are lucky to have access to Elna’s 30 years of presence and experience in Malaysia, which gives us the advantage to expand outside of China faster than many of our peers,” a PSA executive said. “We are optimistic about bolstering the supply chain ecosystem here, as we see more and more demand, related to de-risking or security factors, to produce outside of China.”

And as recent events in Washington show, the need for de-risking is only going to grow.

Ramping up the rules

The US is launching a new round of export controls on chipmaking equipment and quantum computing technologies with immediate effect as a continuous effort to restrain China’s technological advances in such fields, Nikkei Asia’s Cheng Ting-Fang, Lauly Li, and Katherine Creel write.

The implementation of the new rules came just two months ahead of the US presidential election, the outcome of which is set to shape Washington’s foreign relations and trade policies for the next four years.

The new controls will bring Washington in line with similar restrictions put in place by other countries, the Department of Commerce said, adding that it expects further co-ordination on this front between “like-minded” countries.

Less than 24 hours later, the Netherlands rolled out more export controls on the advanced chipmaking tools made by top semiconductor equipment supplier ASML.

The Dutch government said the rules, which expand its curbs to apply to all types of immersion deep ultraviolet (DUV) lithography equipment, brings the country’s restrictions in line with those of the US Immersion DUV tech is crucial for manufacturing chips at the 40-nanometre grade and better.

Discount access

The cost of renting cloud services using Nvidia’s leading artificial intelligence chips is lower in China than in the US, a sign that the advanced processors are easily reaching the Chinese market despite Washington’s export restrictions.

Smaller cloud providers in the country charge around $6 an hour for a server using eight Nvidia A100 processors, while US vendors charge about $10, Ryan McMorrow and Eleanor Olcott write for the Financial Times.

Chinese companies can easily access Nvidia chips, with resellers openly selling the chips crucial for AI training on sites like Taobao and Xiaohongshu and at prices only slightly above what they sell for in the US.

Larger Chinese cloud providers, like Alibaba and ByteDance, charge more than their smaller Chinese rivals. “The big players have to think about compliance, so they are at a disadvantage. They don’t want to use smuggled chips,” explained a Chinese start-up founder. “Smaller vendors are less concerned.”

The chips are up

Chips are poised to become a $1tn global industry in six to eight years and a $2tn industry in as little as eight years after that, Ajit Manocha, the president and CEO of industry association SEMI, told Nikkei Asia’s Cheng Ting-Fang and Lauly Li in an exclusive interview.

The chip industry will grow 20 per cent this year, supported by a recovery in memory and AI-related demand, despite automotive and industrial applications remaining sluggish, Manocha said, citing Semi’s forecast. He added that the next driving force would be quantum computing.

The industry veteran also said more semiconductor “hubs” will be needed to guarantee supply chain resilience even as major chip economies remain deeply dependent on one another.

“Many countries in the world are starting to think about chip supremacy, and if you end up creating more hubs, that provides the redundancy,” he said. “That would actually be a good thing for supply chain resilience.”

Apple vs. Huawei

Apple, the world’s most profitable smartphone company, unveiled its latest flagship iPhone with long-awaited artificial intelligence capabilities. But these new features will not be available in China and Japan, two of its key markets, until next year, Nikkei Asia’s Yifan Yu writes.

The biggest selling point of the iPhone 16 is its Apple Intelligence, which promises more intuitive interaction with Apple’s Siri voice assistant and the integration of ChatGPT into the operating system. But Apple Intelligence will be available only in US English in beta test mode next month, with localised English versions for Australia and several other markets to come in December.

A delayed rollout of Apple Intelligence is not the only headwind the iPhone maker could be facing in China. Just days before the launch of the iPhone 16, rival Huawei introduced a tri-fold smartphone.

The Mate XT attracted pre-orders from approximately 1.3mn consumers in just seven hours, writes Nikkei’s Itsuro Fujino.

The smartphone will go on sale on September 20, the same day as the iPhone 16 series begins sales in the first swath of 58 countries and regions, including China, India and Japan.

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